Conclusion 376

Art. 1600: Sales are extinguished by the same causes as all other obligations, by those stated in the preceding articles of this Title, and by conventional or legal redemption.

Sales are extinguished by the same causes as all other obligations (Art. 1600), such as:

1. Payment or performance of obligation 2. Loss of the thing due

3. Condonation or remission of debt 4. Confusion or merger of rights 5. Compensation

6. Novation 7. Rescission 8. Annulment

9. Fulfillment of a resolutory condition 10. Prescription

Sales are also extinguished by CONVENTIONAL OR LEGAL REDEMPTION.

*Conventional Redemption Conventional redemption:

 seller reserved the right to repurchase thing sold

 coupled with obligation to return price of the sale, expenses of contract & other legitimate payments and the necessary &

useful expenses made on the thing sold

 right is exercised only by seller in whom right is recognized in the contract or by any person to whom right was transferred

* A right of repurchase is an alienable right and within the commerce of man. It may be sold, attached and levied upon.

Equitable Mortgage (requisites):

1. the parties entered into a contract denominated as sale 2. the intention was to secure an existing debt by way of mortgage Rationale Behind Provision on Equitable Mortgage

1. To avoid circumvention of usury law

2. To avoid circumvention of prohibition against pactum commissorium – creditor cannot appropriate the things given by way of pledge or mortgage; remedy here is foreclosure

Art. 1601: Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold, with the obligation to comply with the provisions of Article 1616 and other stipulations which may have been agreed upon.

Art. 1602: The contract shall be presumed to be an equitable mortgage, in any of the following cases: [IPERTOD]

(1) When the price of a sale with right to repurchase is unusually inadequate;

(2) When the vendor remains in possession as lessee or otherwise;

(3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed;

(4) When the purchaser retains for himself a part of the purchase price;

(5) When the vendor binds himself to pay the taxes on the thing sold;

(6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation.

In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws.

Art. 1603: In case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage.

Art. 1604: The provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale.

Art. 1605: In the cases referred to in Articles 1602 and 1604, the apparent vendor may ask for the reformation of the instrument.

(See Art. 1359)

Art. 1606: The right referred to in Article 1601, in the absence of an express agreement, shall last four years from the date of the contract.

Should there be an agreement, the period cannot exceed ten years.

However, the vendor may still exercise the right to repurchase within thirty days from the time final judgment was rendered in a civil action on the basis that the contract was a true sale with right to repurchase.

(This is not applicable to absolute sale. This is applicable only where the nature or character of the transaction, as to whether it is a pacto de retro sale or equitable mortgage, was put in issue before the court.)

Art. 1607: In case of real property, the consolidation of ownership in the vendee by virtue of the failure of the vendor to comply with the provisions of article 1616 shall not be recorded in the Registry of Property without a judicial order, after the vendor has been duly heard.

(pertains to the recording of the consolidation of ownership)

Art. 1608: The vendor may bring his action against every possessor whose right is derived from the vendee, even if in the second contract no mention should have been made of the right to repurchase, without prejudice to the provisions of the Mortgage Law and the Land Registration Law with respect to third persons.

Art. 1609: The vendee is subrogated to the vendor's rights and actions.

Art. 1610: The creditors of the vendor cannot make use of the right of redemption against the vendee, until after they have exhausted the property of the vendor.

(This is in consonance with Art. 1177)

Art. 1611: In a sale with a right to repurchase, the vendee of a part of an undivided immovable who acquires the whole thereof in the case of article 498, may compel the vendor to redeem the whole property, if the latter wishes to make use of the right of redemption.

Art. 1612: If several persons, jointly and in the same contract, should sell an undivided immovable with a right of repurchase, none of them may exercise this right for more than his respective share.

The same rule shall apply if the person who sold an immovable alone has left several heirs, in which case each of the latter may only redeem the part which he may have acquired.

Art. 1613: In the case of the preceding article, the vendee may demand of all the vendors or co-heirs that they come to an agreement upon the purchase of the whole thing sold; and should they fail to do so, the vendee cannot be compelled to consent to a partial redemption.

Art. 1614: Each one of the co-owners of an undivided immovable who may have sold his share separately, may independently exercise the right of repurchase as regards his own share, and the vendee cannot compel him to redeem the whole property.

Art. 1615: If the vendee should leave several heirs, the action for redemption cannot be brought against each of them except for his own share, whether the thing be undivided, or it has been partitioned among them.

But if the inheritance has been divided, and the thing sold has been awarded to one of the heirs, the action for redemption may be instituted against him for the whole.

Art. 1616: The vendor cannot avail himself of the right of repurchase without returning to the vendee the price of the sale, and in addition:

(1) The expenses of the contract, and any other legitimate payments made by reason of the sale;

(2) The necessary and useful expenses made on the thing sold.

(construe with Art. 547 and Art. 547; enumeration is not exclusive; tender of payment is enough because other expenses are still subject to validation)

Art. 1617: If at the time of the execution of the sale there should be on the land, visible or growing fruits, there shall be no reimbursement for or prorating of those existing at the time of redemption, if no indemnity was paid by the purchaser when the sale was executed.

Should there have been no fruits at the time of the sale and some exist at the time of redemption, they shall be prorated between the redemptioner and the vendee, giving the latter the part corresponding to the time he possessed the land in the last year, counted from the anniversary of the date of the sale.

Art. 1618: The vendor who recovers the thing sold shall receive it free from all charges or mortgages constituted by the vendee, but he shall respect the leases which the latter may have executed in good faith, and in accordance with the custom of the place where the land is situated.

HYPOTHETICAL QUESTIONS:

1. A land was sold in 1971 for P50k. Later, the vendor claims sale to be an equitable mortgage because of unusual inadequacy of the price. Is he correct?

No. Price is not inadequate because of circumstance and time the thing was sold. In 1971, P50k is already a big amount.

Inadequacy of price is determined at the time of sale.

2. (?) A third person acquires right of repurchase of vendor, which was attached and sold at a public auction where the former became the highest bidder. May vendor still exercise right of repurchase?

3. (?)(?)(?) A owes B P100k. B filed an action to collect; and judgment is rendered in his favor. The subject parcel of land was awarded to B. May A be compelled to immediately deliver the land?

No, there is one year right of repurchase.

4. A and B entered into a contract of sale with right of repurchase. They agreed that the right of repurchase is fixed at P600k. Is the stipulation valid?

Yes. Conventional redemption is subject to such ―other stipulations which may have been agreed upon.‖ (Art. 1601) (Solid Homes vs CA)

5. A and B entered into a pacto de retro sale. B, the vendee a retro, sold the subject property to C through an absolute sale.

May A exercise the right of repurchase as against C?

Yes. The vendor may bring his action against every possessor whose right is derived from the vendee, even if in the second contract, there is no mention as to the right to repurchase (Art. 1608)

6. A and B entered into a pacto de retro sale. B, the vendee a retro, leased the subject property to C. May A evict C?

No. A is bound to respect the lease (Art. 1618)

7. B entered into a pacto de retro sale with C. A is a creditor of B. May A proceed directly against C (or levy upon the subject property which is in the possession of C) for the satisfaction of B’s debt?

No. The creditors of the vendor cannot make use of the right of redemption against the vendee until after they have exhausted the property of the vendor. (Art. 1610 in connection with Art. 1177) [Noted: exceptions to this rule are: (a) a mortgage which is recorded prior to sale and (b) mortgage that was foreclosed]

8. A, B, and C are co-owners of an undivided immovable. A sold his share to D, which made D a new co-owner. Partition of the property took place. Subsequently, B and C sold their part of the property to D. Rule the case.

A may be compelled to redeem the whole property if he wishes to redeem (Art. 1611)

9. A, B, and C are co-owners of an undivided immovable. They jointly entered into a contract of pacto de retro sale of the immovable property to D. Rule the case.

None may exercise right to repurchase more than his share. (Art. 1612)

10. X owns a parcel of land. When he died, he left the said land to A, B and C. A, B, and C jointly entered into a contract of pacto de retro sale of the immovable property to D. Rule the case.

None may exercise right to repurchase more than his share. (Art. 1612)

11. In #s 8, 9 and 10, May the vendee demand from vendors to agree to purchase the whole?

Yes. If the vendors cannot agree, the vendee cannot be compelled to consent to partial redemption. (Art. 1613)

12. A, B, and C are co-owners of an undivided immovable. They entered into separate contracts of pacto de retro sale of their shares in favor of one vendee, D. May D compel either of A, B and C to redeem the whole?

No, they cannot be compelled, but each of them may independently exercise the right of repurchase as regards his share.

(Art. 1614)

13. A entered into a pacto de retro sale of an undivided immovable with B. B, the vendee, died leaving C, D, and E as his heirs. May A compel one of the heirs to redeem the whole prop? If the property has already been partitioned, would the answer be the same?

Whether the property is undivided or partitioned, the heirs cannot be compelled to redeem the whole property, except when after partition, the whole property has been awarded to one of the heirs, in which case, he may be compelled to redeem the whole.

14. Suria case (Art. 1616)

15. A entered into a pacto de retro sale of a parcel of land with B. The property is to be redeemed within 3 years from sale.

The land was sold to B at P500k. B further paid P50k for the growing and visible fruits on the land. On the 3^rd year after sale, A sought to redeem the property –

(a) If A will exercise redemption, he must pay P550k as price for sale.

(b) If B did not pay, he is not entitled to reimbursement for crops existing at the time of redemption.

(c) If no crops at the time of sale and some exist at redemption, B is entitled to crops during the last year, i.e. 2^nd year.

(d) If there were crops at the time of sale and B paid them, B must receive reimbursement or is entitled to fruits for the last year because having paid them, the effect is the same as if there were no crops on the land when it was sold.

(Art. 1617)

16. A entered into a pacto de retro sale with B. B, the vendee a retro, mortgaged the property to C. Should B redeem the mortgage prior to A’s exercise of his right of repurchase?

Yes. The vendor who recovers the thing sold shall receive it free from all charges or mortgages constituted by the vendee. (Art. 1618)

17. A, the vendor a retro, before the expiration of the period of redemption, brought an action to declare that such sale is really a simple mortgage. Several years later, it was declared as pacto de retro. Can the vendor a retro still redeem the property?

Yes. See Art. 1601, par. 3

* Legal Redemption

 Legal redemption is not applicable to: (enumeration is not exclusive) (a) barter,

(b) donation

(c) transmission of things by hereditary title, (d) mortgage,

(e) lease

 Article 1492 provides that the prohibitions as laid down in Arts. 1490 and 1491 are also applicable to legal redemption.

Art. 1619: Legal redemption is the right to be subrogated, upon the same terms and conditions stipulated in the contract, in the place of one who acquires a thing by purchase or dation in payment, or by any other transaction whereby ownership is transmitted by onerous title.

(purpose is to minimize co-ownership)

Art. 1303: Subrogation transfers to the persons subrogated the credit with all the rights thereto appertaining, either against the debtor or against third person, be they guarantors or possessors of mortgages, subject to stipulation in a conventional subrogation.

Art. 1620: A co-owner of a thing may exercise the right of redemption in case the shares of all the other co-owners or of any of them, are sold to a third person. If the price of the alienation is grossly excessive, the redemptioner shall pay only a reasonable one.

Should two or more co-owners desire to exercise the right of redemption, they may only do so in proportion to the share they may respectively have in the thing owned in common.

Requisites:

1. Co-ownership

2. Alienation of all or any of the shares 3. Sale to a stranger

4. Before partition

Art. 1621: The owners of adjoining lands shall also have the right of redemption when a piece of rural land, the area of which does not exceed one hectare, is alienated, unless the grantee does not own any rural land.

This right is not applicable to adjacent lands which are separated by brooks, drains, ravines, roads and other apparent servitudes for the benefit of other estates.

If two or more adjoining owners desire to exercise the right of redemption at the same time, the owner of the adjoining land of smaller area shall be preferred; and should both lands have the same area, the one who first requested the redemption.

-Requisites:

1. both lands are rural 2. adjacent

3. there is an alienation 4. less than 1 hectare

- purpose is to encourage maximum development and utilization of agricultural lands

Art. 1622: Whenever a piece of urban land which is so small and so situated that a major portion thereof cannot be used for any practical purpose within a reasonable time, having been bought merely for speculation, is about to be re-sold, the owner of any adjoining land has a right of pre-emption at a reasonable price. (Right of Pre-emption)

If the re-sale has been perfected, the owner of the adjoining land shall have a right of redemption, also at a reasonable price.

When two or more owners of adjoining lands wish to exercise the right of

pre-emption or redemption, the owner whose intended use of the land in question appears best justified shall be preferred. (Right of redemption)

Art. 1623: The right of legal pre-emption or redemption shall not be exercised except within thirty days from the notice in writing by the prospective vendor, or by the vendor, as the case may be. The deed of sale shall not be recorded in the Registry of Property, unless accompanied by an affidavit of the vendor that he has given written notice thereof to all possible redemptioners.

The right of redemption of co-owners excludes that of adjoining owners.

HYPOTHETICAL QUESTIONS

1. A, B and C are co-owners of a parcel of land. A donated his share to X. May B or C exercise legal redemption as against X? No. The transmission of ownership is not by onerous title. See Article 1619.

2. A, B and C are co-owners of a parcel of land. A, through a will, awarded his share to X. May B or C exercise legal redemption as against X?

No. The transmission of ownership is not by onerous title. See Article 1619.

3. A owns a land adjoining B’s, C’s, and D’s lands, all of which are of 10,000 sq. m. (1 hectare). Supposing B, C, and D separately sold their lands to X who owns a rural land, may A redeem all of the lands sold to X?

Yes. All the requisites are satisfied.

4. A owns a rural land adjoining B’s, C’s, and D’s rural lands, all of which are of 10,000 sq. m. (1 hectare). Supposing B, C, and D, in a single contract, sold their lands to X who owns a rural land, may A redeem all of the lands sold to X?

Yes. All the requisites are satisfied. It is not necessary that the sales are made in separate contracts. There are still 4 parcels of land, each not exceeding 1 hectare.

5. A owns a rural land adjoining B’s, C’s, and D’s rural lands, all of which are of 10,000 sq. m. (1 hectare). Supposing B sold his land to C, whose land is adjoining B’s and A’s land, may A exercise the right of redemption?

No. Look into the purpose of the law.

6. A owns a rural land adjoining B’s, C’s, and D’s rural lands. B sold his land to X for P500k but the property is only valued at P300k –

(a) May A exercise the right of repurchase? Yes

(b) How much should A pay? P500k. Art. 1620 (on grossly excessive price) applies only to co-owners

(c) If A, B, C and D are co-owners, how much should A pay? P300k, for Art. 1620 would be the applicable provision.

(d) What if B and X freely agreed that subject is to be sold for P500k, may A compel X to resell the land to him for P300k only? Yes.

7. A, B, and C are brothers and co-owners of a parcel of land. C died, leaving X as his sole heir. B sold his share to X. May A redeem the share sold by B to X?

NO. X is not a stranger to a contract. He is a co-owner.

8. Same facts as # 7, only that X is C’s wife. May A redeem the share sold by B to X?

NO. X is not a stranger to a contract. He is a co-owner.

* Assignment of Credit

Art. 1624: An assignment of creditors and other incorporeal rights shall be perfected in accordance with the provisions of Article 1475.

Art. 1475: The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price.

From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form

From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form

In document Recuperación de variedades infrautilizadas de frutales y de plantas comestibles silvestres para su uso en la alimentación moderna (página 171-187)